Tax Issues Complicate the Costs of Chronic Illness and Long-Term Care Insurance

Abstract

The elderly and their families have good reason to be concerned about chronic illness and the costs of long-term care. Fortunately, though, favorable tax treatment helps alleviate some of the financial burden. This Article discusses the deductibility of long-term care costs, and the taxation of long-term care insurance and life insurance available for chronic illness. Of particular interest are issues relating to retroactive certifications of chronic illness and the inclusion in long-term care costs of medical supplies, non-medical supplies, meals, and lodging. The Article also discusses and illustrates the distortions inherent in the Service's methods for determining the taxable portion of benefits from long-term care insurance.